Académique Documents
Professionnel Documents
Culture Documents
*EN BANC.
190
191
192
SERENO,J.:
_______________
1China National Machinery & Equipment Corporation (Group) v. Hon.
Cesar D. Santamaria, et al.
2Petition, Rollo, Vol. I, p. 25 Memorandum of Understanding dated 14
September 2002, Rollo, Vol. I, pp. 400406.
193
Project.10
Project.10
_______________
3 Petition, Rollo, Vol. I, pp. 2526 Memorandum of Understanding
dated 30 August 2003, Rollo, Vol. I, pp. 308310, 407409.
4Id.
5Memorandum of Understanding dated 30 August 2003, Rollo, Vol. I,
pp. 308310, 407409.
6 Petition, Rollo, Vol. I, p. 26 Letter dated 1 October 2003, Rollo, Vol.
I, pp. 311312.
7 Contract Agreement, Rollo, Vol. I, pp. 126130, 412414.
8 Memorandum of Agreement dated December 2003, Rollo, Vol. I, pp.
198201.
9 Loan Agreement, Rollo, Vol. I, pp. 242282.
10Id.
194
_______________
11Complaint, Rollo, Vol. I, pp. 102125.
12Id.
13Order dated 17 March 2006, Rollo, Vol. I, pp. 290291.
14Urgent Motion for Reconsideration, Rollo, Vol. I, pp. 292307.
15Motion to Dismiss, Rollo, Vol. I, pp. 324369.
195
_______________
16Omnibus Order dated 15 May 2007, Rollo, Vol. I, pp. 648658.
17Motion for Reconsideration, Rollo, Vol. I, pp. 663695.
18Order dated 10 March 2008, Rollo, Vol. I, p. 737.
19Petition for Certiorari, Rollo, Vol. I, pp. 738792.
20CA Decision, Rollo, Vol. I, pp. 8199.
21Motion for Reconsideration, Rollo, Vol. I, pp. 9711001.
22CA Resolution, Rollo, Vol. I, pp. 100102.
23Petition, Rollo, Vol. I, pp. 2728.
196
CNMEG prays for the dismissal of Civil Case No. 06203
before RTC Br. 145 for lack of jurisdiction. It likewise
requests this Court for the issuance of a TRO and, later on,
a writ of preliminary injunction to restrain public
respondent from proceeding with the disposition of Civil
Case No. 06203.
The crux of this case boils down to two main issues,
namely:
1.Whether CNMEG is entitled to immunity,
precluding it from being sued before a local court.
2.Whether the Contract Agreement is an executive
agreement, such that it cannot be questioned by or
before a local court.
First issue: Whether CNMEG is entitled to immunity
This Court explained the doctrine of sovereign immunity
in Holy See v. Rosario,24 to wit:
There are two conflicting concepts of sovereign immunity,
each widely held and firmly established. According to the classical
or absolute theory, a sovereign cannot, without its consent,
be made a respondent in the courts of another sovereign.
According to the newer or restrictive theory, the immunity of
the sovereign is recognized only with regard to public acts
or acts jure imperii of a state, but not with regard to
private acts or acts jure gestionis. (Emphasis supplied
citations omitted.)
xxxxxxxxx
The restrictive theory came about because of the entry of
sovereign states into purely commercial activities remotely
connected with the discharge of governmental functions. This is
particularly true with respect to the Communist states which took
control of nationalized business activities and international
trading.
_______________
24G.R. No. 101949, 1 December 1994, 238 SCRA 524, 535.
197
_______________
25G.R. No. 108813, 15 December 1994, 239 SCRA 224.
26Id., at pp. 231232.
27221 Phil. 179 136 SCRA 487 (1985).
28Id., at p. 184 p. 492.
198
The abovecited portion of the Contract Agreement,
however, does not on its own reveal whether the
construction of the Luzon railways was meant to be a
proprietary endeavor. In order to fully understand the
intention behind and the purpose of the entire
undertaking, the Contract Agreement must not be read in
isolation. Instead, it must be construed in conjunction with
three other documents executed in relation to the Northrail
Project, namely: (a) the Memorandum of Understanding
dated 14 September 2002 between Northrail and
CNMEG30 (b) the letter of Amb. Wang dated 1 October
_______________
29Contract Agreement, Rollo, Vol. I, pp. 127, 413.
30Supra note 2.
199
_______________
31Supra note 6.
32Supra note 9.
200
II.APPROVAL PROCESS
2.1As soon as possible after completion and presentation
of the Study in accordance with Paragraphs 1.3 and 1.4
above and in compliance with necessary governmental laws,
rules, regulations and procedures required from both
parties, the parties shall commence the preparation and
negotiation of the terms and conditions of the Contract (the
Contract) to be entered into between them on the
implementation of the Project. The parties shall use
their best endeavors to formulate and finalize a
Contract with a view to signing the Contract within
one hundred twenty (120) days from CNMEGs
presentation of the Study.33 (Emphasis supplied)
Clearly, it was CNMEG that initiated the undertaking,
and not the Chinese government. The Feasibility Study
was conducted not because of any diplomatic gratuity from
or exercise of sovereign functions by the Chinese
government, but was plainly a business strategy employed
by CNMEG with a view to securing this commercial
enterprise.
2.Letter dated 1 October 2003
That CNMEG, and not the Chinese government,
initiated the Northrail Project was confirmed by Amb.
Wang in his letter dated 1 October 2003, thus:
_______________
33Supra note 2, at 400402.
201
Thus, the desire of CNMEG to secure the Northrail
Project was in the ordinary or regular course of its business
as a global construction company. The implementation of
the Northrail Project was intended to generate profit for
CNMEG, with the Contract Agreement placing a contract
price of USD 421,050,000 for the venture.35 The use of the
term state corporation to refer to CNMEG was only
descriptive of its nature as a governmentowned and/or
controlled corporation, and its assignment as the Primary
Contractor did not imply that it was acting on behalf of
China in the performance of the latters sovereign
functions. To imply otherwise would result in an absurd
situation, in which all Chinese corporations owned by the
state would be automatically considered as performing
governmental activities, even if they are clearly engaged in
commercial or proprietary pursuits.
3.The Loan Agreement
CNMEG claims immunity on the ground that the Aug
30 MOU on the financing of the Northrail Project was
signed by the Philippine and Chinese governments, and its
assignment as the Primary Contractor meant that it was
bound to perform a governmental function on behalf of
China. However, the Loan Agreement, which originated
from the same Aug. 30 MOU, belies this reasoning, viz.:
_______________
34Supra note 6.
35Supra note 8.
202
_______________
36Supra note 9, at 260261.
203
_______________
37Id., at pp. 268269.
38Petition, Rollo, Vol. I, p. 47.
204
_______________
39222 Phil. 381, 384 138 SCRA 63, 67 (1985).
40G.R. No. 152318, 16 April 2009, 585 SCRA 150.
205
206
207
_______________
41Id., at pp. 165173.
208
208 SUPREME COURT REPORTS ANNOTATED
China National Machinery & Equipment Corp. (Group) vs.
Santamaria
_______________
42Supra note 24.
209
VOL. 665, FEBRUARY 7, 2012 209
China National Machinery & Equipment Corp. (Group) vs.
Santamaria
_______________
43Id., at pp. 531533.
44330 Phil. 573 262 SCRA 39 (1996).
210
210 SUPREME COURT REPORTS ANNOTATED
China National Machinery & Equipment Corp. (Group) vs.
Santamaria
211
212
_______________
48Conditions of Contract, Rollo, Vol. I, pp. 202241, 415455.
49Supra note 7. Clause 1.1 of the Contract Agreement provides:
The following documents shall constitute the Contract between the Employer
and the Contractor, and each shall be read and construed as an integral part of the
Contract:
(1)Contract Agreement
(2)Amendments, if any to the Contract documents agreed by the Parties
(3)Conditions of Contract
(4)Technical Documents
(5)Preliminary Engineering Design including Bill of Quantities
(6)Technical Specification
213
33.2.Arbitration
All disputes or controversies arising from this Contract which
cannot be settled between the Employer and the Contractor shall
be submitted to arbitration in accordance with the UNCITRAL
Arbitration Rules at present in force and as may be amended by
the rest of this Clause. The appointing authority shall be Hong
Kong International Arbitration Center. The place of arbitration
shall be in Hong Kong at Hong Kong International Arbitration
Center (HKIAC).
_______________
50G.R. No. 159618, 1 February 2011, 641 SCRA 244, 258259.
51Supra note 7.
52Id.
215
_______________
53Supra note 6.
54Supra note 48.
216
216 SUPREME COURT REPORTS ANNOTATED
China National Machinery & Equipment Corp. (Group) vs.
Santamaria
Petition denied.
Copyright2015CentralBookSupply,Inc.Allrightsreserved.